Here is one choice passage.
Economists essentially have a sophisticated lack of understanding of economics, especially macroeconomics. I know it sounds ridiculous. But the reason why I tell people they should study economics is not so they’ll know something at the end—because I don’t think we know much—but because we’re good at thinking. Economics teaches you to think things through. What you see a lot of times in economics is disdain for other’s lack of thinking. You have to think about the ramifications of policies in the short run, the medium run, and the long run. Economists think they’re good at doing that, but they’re good at doing that in the sense that they can write down a model that will help them think about it—not in terms of empirically knowing what the answers are. And we have gotten so enamored of thinking things through that the fact that we don’t know anything needs to bother us more. So, yes, it’s true that the average guy on the street doesn’t understand economics, and it’s also true that we don’t understand economics. We just have a more sophisticated lack of understanding than the guy on the street.
Read the whole thing here.
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December 2, 2011 at 7:21 am
Michael Webster
Thanks, that was great. Here is the paragraph that I liked the best:
“Take the argument we’ve been having recently. Should we be trying to increase aggregate demand or should we be reducing the deficit?
How could we have such basic disagreement on this? You would think economists would have solved this issue.
Should we let the debt keep on increasing and worry about it later, or should we tackle it now and make it the main priority?
Well, a model is not going to give you the answer because it depends on whether you write the model in such a way that getting aggregate demand up is a good idea, or whether you write it in such a way that people are really worried about future deficits that are coming around the road and they won’t invest because they know that taxes are going to be high in the future.”
December 2, 2011 at 8:17 am
Harry Mauve
Hi Jeff
Great blog by the way.
Glad to see some economists, Ms. Fernandez, addressing the elephant in the room.
Intellectual exercise without scientific rigor is just recreation. Only problem is, Econ is not acknowleded as a recreation and the consequences are rather large.
December 2, 2011 at 1:17 pm
Assorted links — Marginal Revolution
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December 2, 2011 at 4:07 pm
Die Kultur der VWL – Kantoos Economics
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December 5, 2011 at 10:13 pm
umbrarchist (@umbrarchist)
Double-entry accounting is 700 years old. We have cheap computers everywhere. Smartphones are more powerful than mainframes that corporations used to do accounting back in the 60s and 70s. But economists can’t talk about Demand Side Depreciation. How many millions of cars have Americans thrown on the junk heap since the Moon landing?
Economists don’t mantion Demand Side Depreciation of durable consumer goods because they left it out of the NET Domestic Product equation.